In a development extremely important to investors, the commander of the 1st Armored Division confirmed today that on April 5th, a whole battalion of Washington's Iraqi troops refused to fight on the side of US Marines. Also, reported Major General Martin Dempsey, 40 percent of Washington's entire Iraqi army has walked off the job, and ten percent have gone over to the side of the anti-US guerrillas.
We can safely assume these troops were some of the most pro-Washington people in Iraq, so their mass desertion and treason against Washington is probably a good indicator of the feelings of most of the Iraqi population.
In my estimation, the probability must now be greater than 90% that the war in Iraq is a lost cause. Barring some kind of miracle, the guerrillas will win. Iraq will become a breeding ground for anti-US 'terrorist' operations, and an inspiration, a shining example of the Islamic world's ability to beat the West, much like the example set by Afghans when they beat the Russians.
So far, the war forecast in the October 2001 Early Warning Report remains on track.
The upshot is that the war will spread much more widely and become far more expensive, driving up the federal deficit, and creating more pressure to finance the deficit through expansion of the money supply.
My long-term prognosis for the dollar is for a further decline, accompanied by huge increases in prices of consumer goods, precious metals, real estate, raw materials including oil, and other non-dollar assets.
Very likely, historians will someday look back on April 2004 as the month the war entered its runaway stage.
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